Budget speech date that is 23rd July, 2024 is effective date for new rates for tax on capital gains- seems a new practice in matter of rate of income tax.

[DEVKUMAR KOTHARI]

Budget speech date that is 23^rd July, 2024 is effective date for new rates for tax on capital gains seems a new practice in matter of rate of income tax.

The Finance Bill was presented in the Parliament on 23^rd  July, 2024 by honorable Finance Minister Smt.  Nirmala Sitharaman in her  7^th consecutive budget presentation.

We find that 23^rd July 2024 appears in the Finance Bill 101 times in different places all relating to long-term capital gains ( 85 times) and short-term capital gains) 13 times

These are for “ before 23/07/2024” and “on or after 23.07.2024” and some cases will be for w.e.f. 23.07.24 for change of rates and also for amended definition of ‘short- term capital asset’ in section 2 (42A) vide clause 3 of the  BILL No. 55 OF 2024 - THE FINANCE (NO. 2) BILL, 2024 .

23^rd July as a cutoff date is difficult to keep record of by assessee, tax documents preparers and in tax documents even if it is computerized. Various forms of ITR , orders, computations formats will have to be tuned to workout tax payable in respect of capital gains. Because in relation to rate of tax on capital gains now it is proposed to provide  that rate of tax will be  different for transfers which took place before 23/07/ 24 and which took place on or after 23/07/24. The proposal is for both short-term and long-term capital gains.

Different period of holding will  also be  applicable while computing capital gains for FY 2024-25 relevant to AY 2025-26.

This will have impact on reporting by various concerned authorities, parties like Depositories (CDSL and NSDL).

This will also have impact on computation of installments of advance tax payable on and after 15^th September 2024 for FY 2024-25 and it will also affect interest payable for delay or deferment of advance tax due to change in rates of tax.

Care required by taxpayers:

More care will be needed to keep record of date and evidence of date of transfer of capital asset. Disputes may arise about date of transfer.

Particularly , in relation to Security transactions, it is normal practice to treat date of contract as date of transfer. However, now it will have to be seen that what is actual date of transfer. In most of contracts now –a-day’s delivery take place on T+1 days basis that means one day after date of contract. In case of transactions by way of contract, delivery can be after few  more days also for example  in case of intervening holidays , no delivery period of any  security  etc.

Care will also be required to establish date in respect of transfer of other capital assets also.